Common shares outstanding plus shares underlying stock-based awards
totaled 502 million on June 30, 2017, compared with 495 million one year
ago.

Net sales increased 25% to $38.0 billion in the second quarter, compared
with $30.4 billion in second quarter 2016. Excluding the $502 million
unfavorable impact from year-over-year changes in foreign exchange rates
throughout the quarter, net sales increased 26% compared with second
quarter 2016.

Operating income decreased 51% to $628 million in the second quarter,
compared with operating income of $1.3 billion in second quarter 2016.

Net income was $197 million in the second quarter, or $0.40 per diluted
share, compared with net income of $857 million, or $1.78 per diluted
share, in second quarter 2016.

“Our teams remain heads-down and focused on customers,” said Jeff Bezos,
Amazon founder and CEO. “In the last few months, we launched Echo Show
(our newest Echo device with a video screen), introduced calling and
messaging via Alexa on all Echo devices, debuted Inside Edge on
Prime Video (the first of 18 Indian Original Series), introduced Amazon
Channels in both the U.K. and Germany, launched four new Fire tablets,
expanded Amazon Fresh to Germany, launched Prime Now in Singapore,
launched our 25th airplane with Prime Air, hired more than
30,000 new employees, opened three new Amazon Books stores, launched
more than 400 significant AWS features and services, migrated more than
7,000 databases using AWS Database Migration Service, and held our third
annual Prime Day — signing up more Prime members than ever before. It’s
energizing to invent on behalf of customers, and we continue to see many
high-quality opportunities to invest.”

Highlights

The third annual Prime Day was the biggest global shopping event ever
for Amazon with more new Prime members joining Prime than any single
day in Amazon history. Hundreds of thousands of small businesses and
entrepreneurs participated in the global event and sold more than 40
million units.

Prime Day was the biggest sales event ever for Amazon devices
worldwide, including record sales for Echo, Fire tablets, and Kindle
devices. The Echo Dot was the best-selling Amazon device this Prime
Day and was the best-selling product from any manufacturer in any
category across Amazon globally. The All-New Element 55-inch 4K Ultra
HD Smart LED TV — Amazon Fire TV Edition was the best-selling TV deal
in Amazon history, selling through record units in less than four
hours.

Amazon Studios released The Big Sick in theaters nationwide,
starring Kumail Nanjiani, Zoe Kazan, Holly Hunter, and Ray Romano. The
Big Sick has gained widespread critical acclaim, earning a score
of 98% on Rotten Tomatoes and a metascore of 87 on Metacritic.

Amazon Video received 16 Emmy nominations, including nominations for
Original Series Transparent, The Man in the High Castle, Mozart
in the Jungle, and Catastrophe.

Amazon Studios will premiere a slate of new Original Series and Movies
in the coming months, including new Original Series The Last Tycoon,
The Tick, The Marvelous Mrs. Maisel, and the second
season of The Grand Tour, as well as the theatrical debut of
Original Movies Last Flag Flying, Wonderstruck, and Wonder
Wheel.

Prime Video launched its first Indian Amazon Original, Inside Edge.
This ten-episode series combines the worlds of cricket and
entertainment and is available in over 200 countries and territories
worldwide.

Amazon Channels launched in the U.K., Germany, and Austria, bringing
Prime members the choice to subscribe to a wide range of live and
on-demand TV channel subscriptions, including Discovery and Eurosport
Player in the U.K., as well as MGM and GEO Television in Germany and
Austria.

Amazon introduced Echo Show, a new Echo device that gives customers
everything they love about Alexa, now with a video screen. Just ask
and view music lyrics with Amazon Music, box scores from last night’s
game, video clips, camera feeds, Prime Photos, and more. In addition,
Echo Show can instantly connect with family and friends through video
calling and messaging.

Amazon launched calling and messaging via Alexa on Echo devices.
Hands-free calling, video calling, and messaging bring family and
friends closer together, making Amazon Echo a communal device in your
home. Additionally, Alexa keeps getting even smarter with
customer-requested features such as proactive reminders and named
timers.

Amazon introduced new Alexa smart home capabilities for customers,
including the ability to use Alexa to control entertainment devices
like televisions, connected speakers, and remotes; view feeds from
smart cameras on their Echo Show; control Roomba vacuum cleaners; or
turn their IKEA smart lights on and off.

The Alexa Skills store now offers customers more than 15,000 skills.
Customers can listen to over 200 channels from SiriusXM, check their
American Express account, watch trailers and purchase movie tickets
from Fandango, and more.

Amazon added four new Fire tablets to its lineup, including the
all-new Fire 7, the next generation of Amazon’s best-selling tablet;
the all-new Fire HD 8, the next generation of Amazon’s highest
customer-rated tablet; and two new tablets built from the ground up
for kids — the Fire 7 Kids Edition and Fire HD 8 Kids Edition.

Amazon and Migu, a subsidiary of China Mobile with one of the largest
online reading libraries in China, announced the Kindle X Migu
E-reader, an entirely new Kindle created exclusively for readers in
China. The new Kindle combines features readers love about Kindle with
over 460,000 eBooks from the Kindle Store and over 400,000 online
literature titles from Migu.

Amazon launched Prime Now in Singapore, offering free two-hour
delivery on tens of thousands of items. Customers can shop on the
Prime Now app for everything on their list from eggs, cold beer, and
ice cream to baby strollers, toys, and consumer electronics.

AmazonFresh is now available in Germany, including Berlin and Hamburg,
offering customers a broad selection of groceries in addition to
everyday products.

Amazon Business now serves more than one million business customers in
the U.S., offering business-only discounted pricing on millions of
items and access to more than 85,000 business sellers.

Amazon hosted Boost with FBA, a summit for small business and
entrepreneurs participating in the FBA program. The inaugural event
brought together more than 1,000 entrepreneurs and small business
owners to meet with Amazon leaders and learn more about the tools and
services available for growing their businesses.

Amazon Books recently opened bookstores in Lynnfield, MA, Paramus, NJ,
and New York, NY, and now has eight bookstores across the U.S. with
five more stores coming soon. Amazon Books integrates the benefits of
offline and online shopping to help customers discover books and
devices.

Amazon Web Services (AWS) announced that Ancestry, the global leader
in family history and consumer genomics; Hightail, a virtual workspace
for creative collaboration and file sharing; and California
Polytechnic State University are going all-in on AWS. Other enterprise
customers that have recently chosen AWS to run significant production
workloads include Discovery Communications, Morningstar, BP, and
Zillow Group.

AWS announced that in 2018 it will open a new infrastructure region in
Hong Kong and a second GovCloud region in the U.S. AWS currently
operates 44 Availability Zones across 16 infrastructure regions
worldwide, with announced plans for another 14 Availability Zones
across five AWS Regions.

AWS announced the general availability of AWS Greengrass, software
that allows customers to run AWS compute, messaging, data caching, and
sync capabilities on connected devices. Enel, Konecranes, Pentair, Rio
Tinto, and Stanley Black & Decker are among the customers using AWS
Greengrass to allow connected devices to perform some tasks locally
while leveraging the full processing, analytics, and storage power of
the AWS Cloud. More than a dozen AWS partners including BSquare,
Canonical, Digi International, Intel, Lenovo, Mongoose, Nokia,
Qualcomm Technologies, Raspberry Pi, Samsung, Technicolor, and Wistron
are integrating AWS Greengrass into their platforms so devices will
come with AWS Greengrass built-in.

AWS announced the general availability of Amazon DynamoDB Accelerator
(DAX), a fully-managed, highly available, in-memory cache that can
reduce Amazon DynamoDB response times from milliseconds to
microseconds, even at millions of requests per second. With DAX,
customers using DynamoDB for mobile, web, gaming, ad tech, IoT, and
many other types of applications can achieve 10x faster query
performance.

AWS announced the availability of G3 instances, the next generation of
GPU-powered Amazon Elastic Compute Cloud (Amazon EC2) instances
designed for graphics-intensive workloads like 3D rendering, 3D
visualization, video encoding, and virtual reality applications.
Backed by NVIDIA Tesla M60 GPUs, G3 instances offer double the CPU
power per GPU and double the host memory per GPU than the prior most
powerful GPU cloud instance available.

AWS announced that customers have migrated more than 30,000 databases
using the AWS Database Migration Service since it became generally
available in 2016.

Amazon announced that more than 10,000 employees have participated in
Career Choice, and that it expects to reach 20,000 participants by
2020. Career Choice is Amazon’s innovative career training program
that pre-pays 95% of tuition for high-demand fields, regardless of
whether they are relevant to a career at Amazon. Career Choice has
dedicated on-site classrooms at 25 fulfillment centers, and has
expanded the program to include in-demand fields such as robotics and
photovoltaic certifications.

Amazon now has more than 10 large-scale solar installations on
fulfillment center rooftops, and remains on track to install 50 or
more by 2020. Amazon was the leading corporate purchaser of renewable
energy in the U.S. in 2016, according to the 2017 State of Green
Business report.

Amazon donated more than 47,000 square feet of space within its newest
headquarters building to Mary’s Place Family Shelter in Seattle, which
will include 65 rooms to help shelter more than 200 homeless women,
children, and families each night. Additionally, Amazon announced that
it will match donations up to $1 million through the end of the year
made to Friendship Place, a leader in the Washington, D.C., region in
developing innovative solutions to end homelessness. Amazon also
donated $1 million and 25,000 square feet of space within its Seattle
headquarters to FareStart, a leader in transforming the lives of
people who are homeless or living in poverty through its culinary job
training and employment placement programs. The donations will help
FareStart open five new eateries and launch a foodservice
apprenticeship program to help people living in poverty obtain higher
income jobs.

Financial Guidance

The following forward-looking statements reflect Amazon.com’s
expectations as of July 27, 2017, and are subject to substantial
uncertainty. Our results are inherently unpredictable and may be
materially affected by many factors, such as fluctuations in foreign
exchange rates, changes in global economic conditions and customer
spending, world events, the rate of growth of the Internet, online
commerce, and cloud services, and the various factors detailed below.
This guidance excludes the impact of our proposed acquisition of Whole
Foods Market, Inc.

Third Quarter 2017 Guidance

Net sales are expected to be between $39.25 billion and $41.75
billion, or to grow between 20% and 28% compared with third quarter
2016. This guidance anticipates an unfavorable impact of approximately
$125 million or 40 basis points from foreign exchange rates.

Operating income (loss) is expected to be between $(400) million and
$300 million, compared with $575 million in third quarter 2016.

This guidance assumes, among other things, that no additional business
acquisitions, investments, restructurings, or legal settlements are
concluded.

A conference call will be webcast live today at 2:30 p.m. PT/5:30 p.m.
ET, and will be available for at least three months at
www.amazon.com/ir. This call will contain forward-looking statements and
other material information regarding the Company’s financial and
operating results.

These forward-looking statements are inherently difficult to predict.
Actual results could differ materially for a variety of reasons,
including, in addition to the factors discussed above, the amount that
Amazon.com invests in new business opportunities and the timing of those
investments, the mix of products and services sold to customers, the mix
of net sales derived from products as compared with services, the extent
to which we owe income or other taxes, competition, management of
growth, potential fluctuations in operating results, international
growth and expansion, the outcomes of legal proceedings and claims,
fulfillment, sortation, delivery, and data center optimization, risks of
inventory management, seasonality, the degree to which the Company
enters into, maintains, and develops commercial agreements, proposed and
completed acquisitions and strategic transactions, payments risks, and
risks of fulfillment throughput and productivity. Other risks and
uncertainties include, among others, risks related to new products,
services, and technologies, system interruptions, government regulation
and taxation, and fraud. In addition, the current global economic
climate amplifies many of these risks. More information about factors
that potentially could affect Amazon.com’s financial results is included
in Amazon.com’s filings with the Securities and Exchange Commission
(“SEC”), including its most recent Annual Report on Form 10-K and
subsequent filings.

Our investor relations website is www.amazon.com/ir and we encourage
investors to use it as a way of easily finding information about us. We
promptly make available on this website, free of charge, the reports
that we file or furnish with the SEC, corporate governance information
(including our Code of Business Conduct and Ethics), and select press
releases and social media postings, which may contain material
information about us, and you may subscribe to be notified of new
information posted to this site.

About Amazon

Amazon is guided by four principles: customer obsession rather than
competitor focus, passion for invention, commitment to operational
excellence, and long-term thinking. Customer reviews, 1-Click shopping,
personalized recommendations, Prime, Fulfillment by Amazon, AWS, Kindle
Direct Publishing, Kindle, Fire tablets, Fire TV, Amazon Echo, and Alexa
are some of the products and services pioneered by Amazon. For more
information, visit www.amazon.com/about and follow @AmazonNews.

AMAZON.COM, INC.

Consolidated Statements of Cash Flows

(in millions)

(unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

Twelve Months Ended June 30,

2016

2017

2016

2017

2016

2017

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

$

12,470

$

15,440

$

15,890

$

19,334

$

10,269

$

12,521

OPERATING ACTIVITIES:

Net income

857

197

1,370

921

1,931

1,922

Adjustments to reconcile net income to net cash from operating
activities:

Depreciation of property and equipment, including internal-use
software and website development, and other amortization, including
capitalized content costs

1,909

2,633

3,736

5,068

7,087

9,448

Stock-based compensation

768

1,158

1,312

1,952

2,461

3,615

Other operating expense, net

53

60

97

102

166

164

Other expense (income), net

32

(120

)

(18

)

(160

)

121

(162

)

Deferred income taxes

106

376

117

354

243

(8

)

Changes in operating assets and liabilities:

Inventories

(57

)

(682

)

712

265

(2,167

)

(1,874

)

Accounts receivable, net and other

(1,184

)

(1,242

)

(772

)

(248

)

(2,538

)

(2,842

)

Accounts payable

977

2,088

(4,793

)

(4,777

)

3,377

5,046

Accrued expenses and other

(15

)

(252

)

(972

)

(1,657

)

1,007

1,039

Additions to unearned revenue

2,340

3,047

5,154

7,100

9,355

13,877

Amortization of previously unearned revenue

(2,208

)

(3,434

)

(4,318

)

(6,681

)

(7,994

)

(12,340

)

Net cash provided by (used in) operating activities (1)

3,578

3,829

1,625

2,239

13,049

17,885

INVESTING ACTIVITIES:

Purchases of property and equipment, including internal-use software
and website development, net

(1,711

)

(2,501

)

(2,890

)

(4,362

)

(5,395

)

(8,207

)

Acquisitions, net of cash acquired, and other

(14

)

(633

)

(30

)

(678

)

(452

)

(765

)

Sales and maturities of marketable securities

931

2,293

2,069

4,202

4,249

6,866

Purchases of marketable securities

(1,645

)

(4,210

)

(2,281

)

(5,829

)

(4,762

)

(11,304

)

Net cash provided by (used in) investing activities

(2,439

)

(5,051

)

(3,132

)

(6,667

)

(6,360

)

(13,410

)

FINANCING ACTIVITIES:

Proceeds from long-term debt and other

66

66

75

90

202

636

Repayments of long-term debt and other

(70

)

(54

)

(245

)

(122

)

(1,366

)

(232

)

Principal repayments of capital lease obligations

(1,116

)

(1,228

)

(1,917

)

(2,060

)

(3,298

)

(4,003

)

Principal repayments of finance lease obligations

(32

)

(47

)

(61

)

(85

)

(108

)

(170

)

Net cash provided by (used in) financing activities (1)

(1,152

)

(1,263

)

(2,148

)

(2,177

)

(4,570

)

(3,769

)

Foreign currency effect on cash and cash equivalents

64

248

286

474

133

(24

)

Net increase (decrease) in cash and cash equivalents

51

(2,237

)

(3,369

)

(6,131

)

2,252

682

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

12,521

$

13,203

$

12,521

$

13,203

$

12,521

$

13,203

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid for interest on long-term debt

$

143

$

146

$

145

$

150

$

301

$

295

Cash paid for interest on capital and finance lease obligations

48

62

95

123

180

234

Cash paid for income taxes, net of refunds

88

447

226

693

380

879

Property and equipment acquired under capital leases

1,422

2,724

2,297

4,612

4,676

8,019

Property and equipment acquired under build-to-suit leases

231

748

582

1,948

870

2,575

______________________________

(1)

As a result of accounting guidance adopted in Q1 2017, we
retrospectively adjusted our consolidated statements of cash flows
to reclassify excess tax benefits of $113 million for the
three-months ended June 30, 2016, $320 million for the six-months
ended June 30, 2016, and $323 million for the twelve-months ended
June 30, 2016 from financing activities to operating activities.

As a result of accounting guidance adopted in Q1 2017, we
retrospectively adjusted our consolidated statements of cash flows
to reclassify excess tax benefits from financing activities to
operating activities. The amount of the adjustment was $305 million
for TTM Q1 2016, $323 million for TTM Q2 2016, $401 million for TTM
Q3 2016, and $829 million for TTM Q4 2016.

(2)

Free cash flow is cash flow from operations reduced by “Purchases of
property and equipment, including internal-use software and website
development, net,” which is included in cash flow from investing
activities.

(3)

Free cash flow less lease principal repayments is free cash flow
reduced by “Principal repayments of capital lease obligations,” and
“Principal repayments of finance lease obligations,” which are
included in cash flow from financing activities.

(4)

Free cash flow less finance lease principal repayments and assets
acquired under capital leases is free cash flow reduced by
“Principal repayments of finance lease obligations,” which is
included in cash flow from financing activities, and property and
equipment acquired under capital leases. In this measure, property
and equipment acquired under capital leases is reflected as if these
assets had been purchased with cash, which is not the case as these
assets have been leased.

(5)

Average Total Assets minus Current Liabilities (excluding current
portion of Long-Term Debt and current portion of capital lease
obligations and finance lease obligations) over five quarter ends.

Includes product sales and digital media content where we record
revenue gross. We leverage our retail infrastructure to offer a wide
selection of consumable and durable goods that includes electronics
and general merchandise as well as media products available in both
a physical and digital format, such as books, music, video, games,
and software. These product sales include digital products sold on a
transactional basis; digital product subscriptions that provide
unlimited viewing or usage rights are included in Retail
subscription services.

(2)

Includes commissions, related fulfillment and shipping fees, and
other third-party seller services.

(3)

Includes annual and monthly fees associated with Amazon Prime
membership, as well as audiobook, e-book, digital video, digital
music, and other subscription services.

(4)

Includes sales not otherwise included above, such as certain
advertising services and our co-branded credit card agreements.

Amazon.com, Inc.Certain Definitions

Customer Accounts

References to customers mean customer accounts, which are unique
e-mail addresses, established either when a customer places an order
or when a customer orders from other sellers on our websites. Customer
accounts exclude certain customers, including customers associated
with certain of our acquisitions, Amazon Payments customers, AWS
customers, and the customers of select companies with whom we have a
technology alliance or marketing and promotional relationship.
Customers are considered active when they have placed an order during
the preceding twelve-month period.

Seller Accounts

References to sellers means seller accounts, which are established
when a seller receives an order from a customer account. Sellers are
considered active when they have received an order from a customer
during the preceding twelve-month period.

AWS Customers

References to AWS customers mean unique AWS customer accounts, which
are unique customer account IDs that are eligible to use AWS services.
This includes AWS accounts in the AWS free tier. Multiple users
accessing AWS services via one account ID are counted as a single
account. Customers are considered active when they have had AWS usage
activity during the preceding one-month period.

Units

References to units mean physical and digital units sold (net of
returns and cancellations) by us and sellers at Amazon domains
worldwide as well as Amazon-owned items sold through non-Amazon
domains. Units sold are paid units and do not include units associated
with AWS, certain acquisitions, rental businesses, or advertising
businesses, or Amazon gift cards.